No-deal Brexit threat to our food firms

Bord Bia, Greencore, and the Revenue Commissioners were among a batch of parties to issue stark warnings to the Irish food industry on its looming tariff-laden future last week.

Talk of rotten produce and intensified border checks painted a bleak picture during a British and Irish Chamber of Commerce event. The agri-food industry exports around €11.15bn a year, 37pc of which ends up in the UK.

Those exports face an uncertain future with it now likely that numerous changes will be made to the way they enter the UK. Revenue has already said that it is preparing for a no-deal Brexit, which will result in the development of a 54-box customs declaration.

The CEO of Greencore, one of Britain’s largest sandwich-makers, Patrick Coveney described Brexit as a “profoundly depressing topic” and said that the final deal will ultimately be a “fudge”.

“Many of us wrestled with this tension of Brexit emotion versus Brexit logic,” he said.

“There’s a certain part of all of us that wants Britain to get their comeuppance. This is a self-inflicted wound on a massive scale and they almost deserve to be punished for it.”

The brother of foreign affairs minister Simon Coveney also issued a stern warning around the net effect increased border checks, or a divergence between the UK and the EU on food standards could have on the supply chain.

“We at Greencore are not really concerned about tariffs at all, our issue is the logistics and administration of getting fresh food in and out of the UK,” he said.

“If you end up with 50-mile tailbacks in Calais and corresponding tailbacks in Dover, it won’t really matter whether there is a 15pc or 20pc surcharge on lettuce and fruit and vegetables coming from southern Europe. It will all rot in containers, and there is no good answer to that at the moment.”

In relation to his company, Coveney outlined a specific set of challenges around staffing that have already come into effect as a result of the June 2016 vote. The company employs around 12,000 people in the UK, around 4,000 of which are EU nationals.

The food chief said that a “huge amount” of work had gone into the retention of staff after floods of people emigrated from the UK as they no longer “felt welcome”.

A heightened cost base around staffing will be one of the issues assessed by analysts in evaluating the food giant, according to Goodbody analyst Jason Molins.

“There are a number of players and companies that have found themselves in the same position as Greencore,” he said. “They have flagged that you either need to replace, or you need to put structures in place to get permits for a number of these workers and have them bypassed by the new stipulations that could be implemented.”

Coveney’s grim scenario of trucks bumper-to-bumper in France and the UK while the goods inside perish, was backed up by details of the new reality from Carol-Ann O’Keeffe, Revenue’s assistant principal officer in the corporate affairs and customs division.

She has warned that the inspection of goods as they are coming in and out of the country will now need to be conducted at the Border.

O’Keefe said that Revenue was preparing for the worst, and that it was ultimately putting in place precautions for a no-deal Brexit where the UK will plummet out of the Customs Union.

The looming changes have left Irish exporters facing significant challenges, but many of them have made progress in bringing forward plans to prepare for Brexit. Around 85pc of agrifood businesses here are actively moving to break into new markets, according to the most recent Brexit barometer from Bord Bia. The outlook among Irish firms has improved too, with just a quarter viewing Britain’s exit from the EU with pessimism.

Bord Bia has been telling its clients repeatedly to speak to their customers. Speaking to the Sunday Independent, chief executive Tara McCarthy said that companies have been told not to get “distracted” by the drama of Brexit.

“The companies that we have found in our research that haven’t been talking to their customers, they’re the guys that we’re really, really trying to get in contact with,” she said. “They have to engage with their journey or they will lose if they’re not prepared.”

McCarthy said that while larger companies such as Greencore may be able to absorb the cost of increased tariffs, smaller companies will need to build their financial resilience against the prospect of World Trade Organisation charges.

“The challenge for smaller companies is how to negotiate that, and that’s why financial resilience is absolutely core. Every retailer in the UK is becoming more and more aware of the tariffs that they will be exposed to but everyone who exports to the UK will be hit by those exact same tariffs,” she said.

“The big challenge is the time that will take to work itself through the system. Some companies from a working capital perspective were very, very close to the edge because of the volatility and that resilience wasn’t in there.”

Another risk posed to Irish businesses is the suspension of food controls in the UK after Brexit. Head of policy at the Chartered Institute of Environmental Health Tony Lewis warned that the British government was aware such a scenario could come into fruition. He said it would likely leave it open to “food fraud and criminality”.

In July, a report by UK think tank Food Research Collaboration warned that Britain would be forced to open its borders to food imports in the event of any delay in a Brexit deal. The same study also outlined potential plans by the EU to block exports from the UK due to its “cavalier” approach to safety standards in food and drink. The think tank said that it had been informed by a senior UK government adviser that the border controls needed to be suspended to prevent produce from going off at the nation’s ports.

McCarthy said that it was hard to see a situation where there were no food controls in the UK. She said that retailers like Tesco and Sainsbury’s will only buy produce from food producers that they trust.

“It is in nobody’s interest to undermine confidence in the supply chain by implying or by allowing there to be no checks,” she said.

“Big retailers in the UK that export Irish goods have their produce checked in Ireland and clearly we won’t be reducing our standards.”

McCarthy warned that it was “positively dangerous” to discuss a landscape with no controls as it could undermine the supply chain.